Question

1.

Complete the following table and calculate the inflation rates.

Consumer Price Index

Year	Cost of Living	CPI
reference base	$10,000	100
2013	$20,000
2014	$22,000
2015	$23,000

  % (precise to 1 decimal point, e.g., 9.4%)

  % (precise to 1 decimal point, e.g., 9.4%)

2.

Suppose a community has a total population of 500, of which 100 are youth under the age of 16, 100 work 40 hours per week, 100 work 1-39 hours per week, 100 have been looking for work in the past four weeks, 50 are retired, 25 are college students, and 25 stay home voluntarily.

What is the labor force?   

What is the working age population?   

What is the unemployment rate?   % (e.g., 12%)

What is the labor force participation rate?   % (e.g., 12%)

3.

An economy produces only fish and oranges. The table below shows the quantity produced and their prices in 2007 and 2008. What are the nominal GDP in 2007 and 2008? And what is the real GDP in 2008 using prices in 2007? (base year = 2007)

	In 2007		In 2008
Item	Quantity	Price	Quantity	Price
Fish	60	$3	66	$4
Oranges	70	$3	77	$6

Year	nominal GDP	real GDP	Growth rate
2007	$	$	-
2008	$	$	%

What is the real GDP in 2008?

4.

Excess reserves refer to the remaining cash reserves financial institutions have after satisfying the reserve requirement. Suppose a bank receives one and only one cash deposit of $6,000,000, and the current required reserve ratio is 10%. What is the excess reserves?

• A.

  5,400,000

• B.

  3,600,000

• C.

  4,000,000

• D.

  4,500,000

5.Shannon made $50,000 last year and received a $10,000 raise this year for her excellence at work. With the additional income, she spent $6,000 more this year. What is the marginal propensity to consume (MPC) for Shannon?

• A. 70%

• B. 50%

• C. 60%

• D. 40%

6.In the previous question, what is Shannon's marginal propensity to save (MPS)?

• A. 40%

• B. 60%

• C. 10%

• D. 30%

7.Suppose banks keep cash reserves as much as 5% of their deposits (currency drain ratio), and the current required reserve ratio is 10%. What is the money multiplier?

multiplier = (1 + CDR) / (RRR + CDR)

• A. 7

• B. 3

• C. 6

• D. 4

8.Suppose the U.S. real GDP in 2008 is $14 trillion, price level is 2, and velocity of circulation is 4. What is the quantity of money in the economy?

• A. 28 trillion

• B. 7 trillion

• C. 14 trillion

• D. 4 triliion

Answer 1

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